FTX 2.0 Revival Bids Rejected, Liquidation Strategy Confirmed

TLDR

• All bids to revive FTX 2.0 have been rejected.
• 98% of creditors expected to receive over 118% of claims.
• Legal costs related to bankruptcy near $1 billion.

FTX 2.0, a proposed revival of the FTX exchange, has been officially scrapped following the rejection of all restart bids by the bankruptcy lawyers. This announcement signifies a decisive pivot in the estate’s strategy, focusing on finalizing cash repayments to creditors, thereby eliminating the possibility of launching a new exchange.

The decision impacts numerous stakeholders, including the FTX management led by CEO John J. Ray III, the legal firm Sullivan & Cromwell, and the presiding Judge John Dorsey of the U.S. Bankruptcy Court for the District of Delaware. The rejection also involves three unnamed bidders who had submitted proposals to reboot the exchange, all of which were declined.

Stakeholders and Their Roles in the Process

FTX management, under the guidance of CEO John J. Ray III, has been focusing on asset recovery and liquidation following the company’s collapse in 2022. Ray, known for his expertise in handling bankrupt entities, such as Enron, has been instrumental in the process. Meanwhile, the law firm Sullivan & Cromwell has spearheaded the legal procedures, despite initial concerns over conflict of interest due to its past advisory role with FTX.

Judge John Dorsey, overseeing the bankruptcy proceedings, has been a central figure in this decision-making process. His courtroom statement highlighted the complexity of in-kind distributions, noting the absence of requisite cryptocurrency. Additionally, creditors represented by various committees have expressed dissatisfaction, particularly regarding the undervaluation of fiat repayments.

Financial and Market Context of the Rejection

The rejection of FTX 2.0 bids has not led to any new funding or institutional support, marking a complete shift towards liquidation and fiat payouts for creditors. As part of the reorganization plan, 98% of creditors are set to receive at least 118% of their claimed value according to 2022 valuations. Legal and professional costs tied to the bankruptcy proceedings have approached $1 billion since the initial collapse.

Cryptocurrencies such as Bitcoin, Ethereum, and related altcoins have experienced no direct impact from the decision, given that repayments are cash-based. Judge Dorsey reinforced the notion that the FTX token (FTT) holds no value and will not be subject to revival.

Comparison with Past Crypto Bankruptcy Cases

FTX’s strategy mirrors that of past crypto bankruptcies, such as Mt. Gox and other firms like Celsius and Voyager, which have also favored liquidation and fiat payouts over proposed relaunches. Such approaches often lead to dissatisfaction from the original user bases, who cite missed investment upside.

No significant changes have been observable in on-chain data, such as Total Value Locked (TVL) or liquidity shifts, attributable to the FTX 2.0 rejection. With most assets already liquidated or controlled by the estate since 2022, the broader market impact remains minimal.

Current Sentiment Among Creditors and Developers

The creditor community has largely shown negative sentiment toward the decision, voicing legal objections and financial concerns about the taxation implications of fiat distributions. Despite these frustrations, no significant development or community actions have emerged in response to the bankruptcy lawyers’ decision to reject the FTX 2.0 bids.

This event leaves the FTX token (FTT) officially written off as worthless, with other assets like Bitcoin and Ethereum unaffected by the recent decision. Fiat-based repayments have precluded any direct influence on major cryptocurrencies or market pressures related to FTX’s holdings.